Bars or Coins?
We often get asked what the difference is between purchasing a gold bar or gold coin. It is important for individual investors, whether someone is new to investment bullion or not, to consider which one to invest in. As the circumstances and needs are different to each investor, it is important to undertake some research in order to know which one fits best for each individual case. In this article, we have stipulated some of the different factors to consider for the two different bullion types. Please note that we are not providing investment advice with the comments made below.
Gold bars are often issued with certificates and are produced in 24 carat (99.99% pure gold content). All of the Sharps Pixley and Degussa branded gold bars are produced by a LBMA Good Delivery Refiner which sets the standard in terms of purity, weighing, packing and delivery. The presentation of new bars includes sealed packaging which protects the item and adds to an overall attractive presentation of the gold bar. Not only is the gold bar attractive in terms of apprearence but the premiums* are lower on bars when compared to coins as the production costs are lower. This also applies to the different sizes of the bars, as a one kilo gold bar will include a lower manufacturing cost than 10 x 100 gram gold bars. In this example, purchasing a 1 kilo bar opposed to 10 x 100g would save about 1% or in todays price £260.
However, having said that a 1 kilo gold bar entitles lower premium, there are some potential obstacles to bear in mind if you want to be flexible in terms of realising your assets. Smaller bars such as 1 ounce, 50g or 100g can be benefitial when re-selling gold bars, such as releasing some of your investment or part-selling. Moreover, when buying/selling one big amount of gold, you will be facing larger exposure to market risk as you will typically be trading on one gold price. When purchasing smaller bars such as the 1ounce gold bar, you will again face the higher premiums as packaging, serial and matching certificates will need to be produced. Therefore, the premiums on smaller gold bars will also be higher when compared to gold coins.
There are many different coins to chose from which gives you a greater choice in sizes, carats and designs. As coins are stamped with a date, they are ideal as gift items for big occasions such as weddings, anniversaries and birthdays. They are also very flexible in terms of re-selling as smaller units of gold are easy to release when in need of quick access to cash. Moreover, certain coins such as Britannias and Sovereigns hold another benefit which is that they are CGT Free. For the wealthy investor, it is advised to hold CGT free coins as they will benefit when realizing profits from the investment. Selling coins also includes larger flexibility as you do not have to sell everything at once, and will have lower market risk as you will not sell on one gold price. Certain coins such as the Gold Sovereign also hold collectible value and over time, different coins may accrue numismatic value which will increasing the original investment. For example, in the 1960's there was a premium* of 40% on trading gold sovereigns. Other popular coins include Krugerrand which tend to attract a smaller premium.
However, coins do not come with certificates and not all coins are 24 carat (as many are 22 carat or even less for some coins). This can cause larger difficulty when calculating the worth of the coins. From an investment perspective, coins entitle larger premium when compared to larger bars which means that you will get less gold for what you pay. Investing in 32 x 1 ounce gold coins opposed to 1 x 1kg gold bar creates an obstacle if one wants to store the entire investment in one location (eg. safe deposit box). A large quantity of coins are good for spreading in different locations.
For any further questions regarding bullion bars and bullion coins, contact us on 0207 871 0532 or visit us at 54 St James's Street. To purchase gold bars and gold coins online, please click HERE.
*The premium is the additional price above the gold spot price attributed to manufacturing costs, handling, packaging, insurance and delivery. Bullion dealers of good reputation will offer products with a very small premium in order to stay competitive however, they are unavoidable as even the bullion dealer needs to purchase over the spot price.